Sectional title insurance is one of the most important duties trustees deal with. It affects every owner in the scheme, and it becomes urgent when there is a geyser claim, water damage, storm damage, liability incident or renewal increase.
This guide gives trustees and managing agents a practical overview of the main insurance areas that should be reviewed before renewal or an AGM.
1. The body corporate must arrange appropriate scheme insurance
The Sectional Titles Schemes Management Act gives the body corporate important insurance-related functions. Practically, trustees should not treat the insurance policy as a once-a-year admin item. It must be actively reviewed and understood.
At minimum, trustees should know where the policy schedule is, what buildings and common property are insured, what the excesses are, and whether claims history has affected the renewal.
2. Owners may still insure their own additional risks
A body corporate policy does not necessarily cover every possible loss an owner may suffer. Owners may arrange additional insurance for risks not covered by the body corporate policy. This is important when owners ask trustees why a particular item, improvement or personal loss is not paid by the scheme policy.
3. Public liability insurance is a core requirement
Prescribed Management Rule 23 deals with public liability insurance for liability connected with common property. Trustees should check the selected limit, the renewal wording and whether the amount was properly considered by the members.
4. Fidelity cover protects scheme funds
Fidelity cover protects body corporate funds against certain losses involving fraud or dishonesty by people who handle or control scheme money. Trustees should review whether the fidelity limit is appropriate for reserve funds, investments and the operating budget.
5. AGM insurance decisions should be documented
At the AGM, members should deal with insurance replacement value schedules and determine the extent of insurance cover for the body corporate. Trustees should therefore prepare clear information before the meeting, not simply ask owners to approve an unexplained policy schedule.
6. The replacement value schedule matters
One of the biggest risks for a body corporate is being underinsured. The replacement value schedule should reflect the estimated replacement cost of the buildings and relevant improvements, not old purchase prices or municipal values.
Practical trustee checklist before renewal
- Ask for the current policy schedule and renewal terms.
- Check the buildings sum insured and replacement value schedule.
- Confirm when the last professional replacement valuation was done.
- Review public liability and fidelity cover amounts.
- Check excesses, exclusions and special conditions.
- Review claims history, especially repeated water damage or geyser claims.
- Prepare a short trustee note explaining major renewal changes.
Common questions
Does body corporate insurance cover my unit?
The body corporate policy usually focuses on buildings and scheme-related insured property, but each policy and scheme must be checked. Owners should not assume that every improvement, fixture or personal loss is automatically covered.
Does it cover contents?
Usually no. Owners should arrange their own contents insurance for furniture, personal belongings and moveable items.
What must be approved at the AGM?
Trustees should prepare the replacement value schedule and insurance recommendations so members can understand and approve the extent of cover.
Can an owner arrange extra insurance?
Yes. Owners may arrange cover for risks not covered by the body corporate policy, subject to the applicable law, rules and policy arrangements.
Final thought
Trustees do not need to become insurance specialists. But they should understand enough to ask proper questions, keep proper records and make decisions that can be explained to owners.